agents a reason to go along with the pretense. However,
the Code prohibits REALTORS® from misleading buyers
on the material facts about a home. If an agent knows
about a property defect, disclosure is necessary regardless of the seller’s wishes.

Sherry Hutchens, a sales associate with Dudum Real
Estate Group in Walnut Creek, Calif., recognized this
when one of her sellers tried to hide a termite problem
with her home. Despite the termite rods—filled with
chemicals—running from the foundation and along the
stucco exterior of the house, the seller wanted to make
it appear as though there was never a problem.

“[ The seller] called me one day and asked me to
come to the house with my digital camera,” Hutchens
recalls. “When I arrived, I found her on the side of the
house wearing rubber gloves and scrubbing the termite
rods with Brillo pads.” The seller requested that Hutchens take photos of the cleaned rods to “prove that the
termite inspector was wrong” about the home’s current
condition.

Hutchens rightfully refused—and the seller fired her.

The loss of the client was a small price to pay compared to the sanctions Hutchens could have faced had
she done what the seller asked. That breach of the Code
of Ethics would likely have violated the license law, too,
and it could have put her real estate license in jeopardy
and triggered legal action by a duped buyer.

What the Code Says (Article 2): “Avoid exaggeration,
misrepresentation, and concealment” of “pertinent”
facts about the property or the transaction, this Article
says. Typical scenarios that come up under Article 2
involve a seller who does not want to disclose a matter
of significance about the home. To avoid the risk of a
Code violation and possible legal action that may result
from a seller’s failure to disclose, REALTORS® should err
on the side of disclosure.

Similarly concerning is when a seller refuses to disclose an issue because it has been “fixed.” The problem
here is that there are many ways to define how something was fixed. The best thing to do is to ask the seller
for documentation of the fix, including a paid receipt,
and then discuss disclosing and providing evidence of
the fix to a new buyer.

A seller’s refusal to disclose a significant fix to a
property can result in serious liability issues for an
agent if the agent knows about it and the fix fails or was
inadequate.

Giving It Teeth

It’s up to state and local boards to make sure
members adhere to the Code. By Graham Wood

The REALTORS® Code of Ethics sets clear professional standards for the
real estate industry, but how are its principles enforced? Local and state
REALTOR® associations are primarily responsible for making sure members adhere to the Code, and some have developed distinctive methods for
addressing infractions. Here are three approaches to Code enforcement.

Making Education a Priority The Northeast Florida Association
of REALTORS® monitors ethics training closely. Members who haven’t
completed Code of Ethics course requirements within a designated period
receive notifications from the association six months before the deadline.
Two months from the deadline, brokers are sent lists of licensees at their
firm who haven’t completed COE requirements. Once the deadline passes,
members who haven’t met requirements are immediately suspended from
the association, and all their member services are terminated. They’re given
one more chance to complete COE requirements, and if they do, they are
reinstated, says NEFAR communications director Melanie Green.

Streamlining Complaints Several associations, including the Illinois
Association of REALTORS®, have introduced an Ethics Citation Program,
which gives members an easier, faster way to file ethics complaints. On IAR’s
website, complainants can fill out a form, upload documented evidence
of a violation, and submit their complaint online. The program is meant to
encourage more members to file complaints and to resolve them more
quickly, explains Matt Difanis, IAR’s 2014 chairman of Government Affairs
and Public Policy Member Involvement Group. The citation initiative is limited
to certain Articles in the Code that lend themselves to prima facie evidence—
evidence that alone would prove a violation. An ethics citation panel reviews
each complaint, and if a violation is substantiated by the evidence, the
respondent receives a copy of the complaint and a fine. The respondent
maintains the option to request a full hearing on the complaint’s merits.

No Running From Sanctions Ethics violators will have a much harder
time dodging complaints in California. REALTORS® in the Golden State often
belong to two or more local associations, but the boards haven’t necessarily
communicated with one another when a member has been sanctioned or
suspended. That has allowed a member suspended by one board to continue
receiving benefits from others. Under a California Association of REALTORS®
pilot program, launched in March 2012, a member’s suspension by one local
association for failure to comply with sanctions takes effect statewide after a
CAR review. That means that a REALTOR® loses membership status with all
associations in the state and cannot reapply to any of them until the matter
is resolved, says CAR General Counsel June Barlow. To date, no member has
received a statewide suspension.